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  1. #21
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    Seems like Forbar have downgraded their profit forecasts too - largely due to currency impact, but also some indications of tougher markets.

    I've heard it said that brokers have trouble getting SKL management to tell them much about what is going on, although I get the impression that Forbar has a slightly better relationship with them. I therfore tend to take more notice of their views on SKL.

  2. #22
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    quote:Originally posted by Lizard

    Seems like Forbar have downgraded their profit forecasts too - largely due to currency impact, but also some indications of tougher markets.

    I've heard it said that brokers have trouble getting SKL management to tell them much about what is going on, although I get the impression that Forbar has a slightly better relationship with them. I therfore tend to take more notice of their views on SKL.
    Thanks for the updates Liz, went for MHI instead in the end becuase I think Michael's margin pressures are more of a temporary nature and that things in Canada will look good soon. Apparently his daughter is a chip off the old block and doing an excellent job of planning and store roll-out up there. Sales looking better over the last quarter too, so am happy enough to get into MHI at 6.90 today and 6.85 on Friday but, wrong thread...! As for SKL will keep watching... and trying to learn a bit more about their different markets first...

    FG

  3. #23
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    quote:Originally posted by Lizard



    Without better fundamental data, I would at least wait for a technical buy signal.

    I'm not finding much to invest in here in NZ either. Every time I think I've had a great idea, it seems to unravel a few months later!
    Good call Lizard, luckily I took your advice and managed to avoid buying before today's news also bailing out of the MHI idea now after some further research and reconsideration... reckon that my spare cash will find its way over the ditch to add to existing / new Aussie small cap growth stocks over there, which I reckon there are an abundance of still at good prices. Think stocks look cheaper there relative to here at the mo.

    Thanks again

    FG

  4. #24
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    quote:Originally posted by Scrunch

    If anything, the short-term will provide better #'s than long-term. The annual report notes that the FX contracts as at 30 June 2006 had a fair value of $6.3M but a carrying value of $0. This gives them the choice of selling more cheaply than non-hedged competitors or having a wider profit margin on these imported sales. Both of these options are favourable short-term.

    Longer-term there appears to be less currency risk, so the roll-off of these favourable hedging positions isn't such a big issue.
    a) High NZD = Cheaper imports but profits on China-foreign & AUD sales convert less favourably
    b) Low NZD = More expensive profits but the 50%+ of sales outside NZ convert at a better rate hence more revenue and NZD profit.

    Disc - shareholder
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    “ At the top of every bubble, everyone is convinced it's not yet a bubble.”

  5. #25
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    The problem is that although their business maybe more in balance from an FX perspective fundamentally. SKL will still be without the additional P&L from hedging positions. Everyone has assumed that SKL had an effective FX hedge.

    The fact that SKL took the position on 4 years ago when the business was vastly different would indicate that the hedge may not be as effective as when put in place.

  6. #26
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    From NZ Herald website:

    Skellerup issues profit warning
    New 7:30AM Thursday December 21, 2006

    Rural equipment maker Skellerup Holdings has warned that its interim net profit after tax will be around 14 per cent below last year.

    Skellerup said it was being hit by the strong dollar, which continued to trade at around US69c.

    It said net profit for the half year to December 31 would be lower, but its earnings before interest, tax, depreciation and amortisation was likely to be above last year's by around 13 per cent.

    metro / Sky Tower

  7. #27
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    For the record (because I don't think it was in the release to the NZX), management said on Morning Report that each 1c movement in the exchange rate impacts revenue by around $400k. Seems that impact must fall pretty much straight through to the bottom line from the size of the downgrade.

  8. #28
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    Quite a disappointing profit update, and also light on detail. On the importation side of the business a high dollar should be favourable. It must therefore be either exporting elements of the business, foreign subsidaries converting into NZD that cause the downgrade or their FX hedges reducing in value and them now sourcing stock at the same prices as competitors.

    Earlier posts indicated that the reduced revenue rolled through to the bottom line, indicating exports not foreign sub's.

    If they now have an exporters exposure to the NZD, then the future predicted fall in the NZD could make this a buying opportunity.

    But what I don't understand is that I thought they built a factory in China which produced a lot of their stuff, rather than producing in NZ and exporting. Still more work to understand this one, so no wonder some opt to avoid.

  9. #29
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    Thanks to the company for directing me to the detailed result, available here.

    For more details, including the analyst presentation, view the attachments to this

    (If there is any problems with direct access to these links, go to the skellerup web-site and access from there)

  10. #30
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    For continuity, just transferring over my 30 June 07 post from the SKL Chart thread:

    Yes, can see where you are coming from there Winner69. And price fall suggests something going on - perhaps they are putting a cap raising in motion and the potential buyers trying to get maximum value for money? Or just anticipation that a bad result would not have got any better in recent weeks with strong NZD and market anticipates dividend likely to be slashed?

    I would have thought they were a good candidate for a "recovery" stock. The forecast for FY gives underlying second half down to $4.2m NPAT (from $4.8m in first half), but further NZD strength can probably be blamed. I don't like the look of the balance sheet (especially adding in $19.6m paid for Tumedei, $16m write-downs and cash expenses for restructuring and $2.6m approx net dividend payment (after accounting for DRP). But EBITDA must be up close to $20m for the FY which should cover interest by around 3x?

    The balance sheet might be helped (fixed?) by proposed divestment of the agri business ($50-60m?). Failing that, since their underlying businesses appear sound, with rising revenues and supplying strong markets in agri, mining and construction off an increasingly diverse geographical base, I would have thought they would have little difficulty raising capital. It doesn't look to me like a company that is about to collapse.

    Suppose they issued 25m shares at 80cps to raise $20m, they'd still be on a FY08 P/E of under 10 if their 2008 forecast of $12.5m NPAT is correct. And given hedging and interest swaps, surely they have a good part of their variables covered in forecasting that?
    Above comments still look about right. Their forecast for 2008 is based on no divestments though. But they have $55k of short term debt. Either divestments or capital raising are required. It would seem to me that they have a good chance of success, unless market conditions worsen. Still risky until they actually complete. My current valuation is $1.19.

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